Managinggovernanceframeworkpresentation

Selemat Sian I thank you all for a2ending this lecture and pray that we may all be abundant, joyful and prosper in life always. I would like to thank Dr Indrawa> and the conference hosts and organizers for invi>ng me to present my paper and this presenta>on to you today. The topic of your conference is ‘DYNAMIC GOVERNANCE’ and I am here to today to present to you a tac>cal approach and proposal for dynamic ac>on in Indonesian governance and educa>on sector for accountability and good governance performance. I apologise that I speak to you only in Bahasa Ingriss as I am not confident in public speaking my sidikit knowledge of Bahasa Indonesia that has a li2le local mix of Basa Bali. For those of you who have similar difficulty in understanding English – I have provided many text slides in Bahasa Indonesia. These are not the same as my speaking but will give you a summary of the ma2er I am speaking about. I would like to thank Keynote speaker Professor and Rector Dr. Rahman of UiTM in Malaysia for his excellent and insighWul speech yesterday that lays the founda>on for establishing an accountability governance framework in Indonesia. His speech is also an excellent introduc>on to the talk I now present. Dr Aifiah also exposed the relevance of corporate governance drivers in public management – in both the regulatory and the prac>ce paradigms. Dr Rahman introduces and discusses concepts of governance – the concept, implica>ons and factors contribu>ng to why we need accountability in governance. I would now like to extend those cri>cal concepts he discussed into strategic context and tac>cal considera>ons.

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My first approach today is to provide background and ra>onale surrounding presen>ng a transforma>on strategy for consolidated governance – the development and delivery of a good governance accountability framework. We are all well aware of the overall ‘need’ for an accountability framework – of governance – even the topic of this conference is based on recogni>on of this need by governance and educa>on sector. The ‘problem’ or more accurately put a ‘natural trait’ of high level decisions interjected into macroeconomic culture – is that as communi>es we self organize and/or are mandatorily organized into categories, taxonomies and ‘pillars’ of society for a mul>tude of o\en disparate reasons. When we receive a direc>on or ‘command’ from someone ‘above’ – in authority – or even the ini>ator of an idea, a concept, we tend to react to that ‘driver’ through our own filters of reality and our experience in dealing with a command of that nature. For example, if a family in a remote farming village hear the direc>on “you need to teach your children about planet survival – their immediate concern is most likely to their agricultural life – the crops, rice or water supply to their village. In a nearby city the same instruc>on received by the family of a local business man results in thoughts to – trade, sales, how to improve business results and financial prosperity. To the governor of the region – the thoughts will more than likely go to generic prosperity and coordina>on of social services. To the rector of a region university -­‐ the interpreta>on may be how to establish strategies and develop programmes for students to improve their lives. And so on. THE FACT IS – NONE OF THESE SCENARIOS PRESENT A ‘WRONG’ VIEW.

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ALL ARE CORRECT IN THEIR INTERPRETATION OF WHAT IS NEEDED TO MAKE A BETTER BALANCE AND WELLBEING FOR HUMANITY. BUT THE CONUNDRUM AND CONFLICT WE OFTEN REFER TO IN DIFFERENT LEVELS OF GOVERNANCE is that of PRIORITIES OF IMPORTANCE – and how we value and measure what is most important to make our economy, our society and our human rela>ons – sustainable and resilient – that is peaceful, equal rela>ons with minimal suffering and op>mum regenera>on into our communi>es – all the while considering all in our environment with ‘lightest footprint’. When it comes to taking management ac>on in response to the governance commands of authority – the conundrum of priori>es immediately arises when each of those interests, those stakeholder agents in governance society compete to assert the relevance and importance of their needs – or fail to respond, are le\ out of the par>cipa>on circle and then the result is serious flaws or holes in the strength of governance improvements. Many of you here are leaders of people, guides and mo>vators of communi>es and knowledge society and will understand the need to design and deliver solu>ons, curriculum, strategies and other ini>a>ves with considera>on to the ALL as well as the need of individual. Today I want to present to you just that – a ra>onale and considera>on of contexts for consolidated good governance transforma>on in the form of a macroeconomic governance accountability framework – with a unique and individual level driver – in this case a governance context of educa>on and human capital development.

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The top level authority command and driver is financial management standards applica>on and performance results accountability cultural development. The reason I propose a strategic ac>vity of consolidated management to develop a macroeconomic governance model and not simply an implementa>on of a SINGLE STREAM of good governance accountability at micro level is highlighted throughout the paper I have also wri2en for this conference. Yesterday’s speakers have very eloquently described the nature of regulatory frameworks and poten>al indicators or measures for accountability – so I fortunately do not have to expand my discussion into these areas at this point and can remain with the tac>cal approach to bring the authority drivers – o\en described as impossible for reasons of the disparate interests – into a prac>cal reality – in other words – how to empower the transforma>on required – by bringing a consolidated solu>on that may be rudimentary in its early stages of delivery – but can be designed to be ADAPTIVE, SCALABLE, RESILIENT and therefore can be evolved into a POWERFUL NEW GOOD GOVERNANCE MECHANISM. Underpinning the ra>onale for seeking this type of solu>on and ac>on at this >me – and not just purely con>nuing the dialogue of loose or sector isolated communica>ons and knowledge on the subject is the centre of good governance accountability in public and private sector management – THAT IS THE RISK MODEL OF NOT TAKING A CONSOLIDATED AND MACROECONOMIC APPROACH at this cri>cal point in global governance is SEVERE.

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In the past 17 years of sustainable development, management and five years of professional and academic research in Indonesian based governance strategy, development and transforma>on I have witnessed many examples of excep>onal knowledge, capability and capacity in the governance and academic sector here – and from those contribu>ng to Indonesia’s ongoing economic reform. My observa>on is that Indonesia at management level is not short of exper>se, nor willingness, passion and commitment to the necessary changes to bring Indonesia out of developing na>on status. My observa>on (and I am fortunate to stand here before you as an independent management consultant who has both private and public sector experience in reform and transforma>on) and I base this experience to state my opinion that Indonesia holds the competency, capacity and capability internally to make a world first in managing consolidated good governance transforma>on. But my observa>on is that the cultural disparity and diversity of local cultural communi>es that makes this na>on so vibrant and exci>ng to enjoy – is one of highly complex stakeholder management commitment. I believe that unless Indonesia can succeed in Culture RESPONSIVENESS – and form a concilience for governance transforma>on – the na>on public governance may not be able to carry Indonesia through future tests to economic growth and wellbeing. One of the most cri>cal and significant areas to this high risk factor is the current state of human development and educa>on in Indonesia’s macroeconomic society.

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And if Indonesia’s macro environment cannot sustain transforma>on and economic measures of good governance and accountability – cannot build and foster resilience a2ributes and other cri>cal human factors for developing and sustaining prac>ces of good governance and accountability – you can almost be certain that any ‘small’ or individual level incen>ve, measure or implementa>on of accountability management will fail – degrade over >me as the inherent culture erodes the ongoing prac>ces of any implemented solu>on – reinforcing a culture of corrup>on and malprac>ce. In my delivery today – I can only highlight the context of strategic transforma>on and propose a physical ‘solu>on’ and a ‘way’ to ‘make it happen’ – with what I believe op>mum first phase results from a model that must be EVOLUTIONARY. I also highlight that while I stand here before you with actual physical experience of managing transforma>on in government and restructure in Australia and Europe as an interna>onal consultant. I also stand before you as a witness that not all of the first world guided interna>onal prac>ces have completely ‘worked’. The 2008 global crisis is tes>mony to this truth. In fact, as you know global economy remains poised on the brink of further crisis as we speak – an asser>on made by financial giants such as Warren Buffet recently. I am not being the harbinger of doom – simply poin>ng out that the models, theories and regulated prac>ces from first world are also s>ll evolving and if anything we who have economic management experience in first world na>ons bring to you the benefits of our experience and learning out of governance failures.

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As an example men>oned by Dr Rahman yesterday rela>ng to corrup>on.

Experien>al learning from first world implemented governance regula>ons and prac>ces is ongoing and why I state we must always seek to install governance models that are evolu>onary and strategically align to natural balance or homeostasis in func>on. It is an opportune >me for Indonesia to take the best of experien>al learning in first world developed na>ons but at the same >me to consider the implica>ons and strategic direc>on that developed na>ons are now taking to remedy or improve the issues and flaws that have become visible in governance that has overlooked consolida>on and considera>on of disparate and alterna>ve values drivers in economy.

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Taking this ac>on will enable Indonesia to rise out of under developed status on more equal foo>ng with developed na>ons and facilitate a high quality par>cipatory level of interac>ve global economic rela>ons. I present this tac>cal strategy to empower a resilient cultural na>on and mi>gate the risk of economic failure in the face of global economic and environmental uncertainty.

h2p://economicresilience.blogspot.com/p/table-­‐of-­‐contents.html

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My first step today is to iden>fy the cri>cal driver for implemen>ng a good governance accountability framework. That is the implementa>on of IPSAS aligned General Accoun>ng Standards (GAS) under the authority of KSAP standards board – completed in Indonesia in 2015.

INDONESIAN FINANCIAL MANAGEMENT COMMITMENTS

Law No. 17 Year 2003 on State Finance, Law no. 1 Year 2004 State Treasury, Law No. 15 Year 2004 on Audit of State Financial Management and Accountability and Law No. 32 Year 2004 on Local Government. Government Regula>on No. 24 year 2005.

GOVERNING ACCOUNTING STANDARDS = GAS INDONESIAN ACCOUNTING STANDARDS COMMITTEE = KSAP INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS = IPSAS CASH TOWARD ACCRUAL = CTA -­‐ General purpose financial statements for budget periods

Republic of Indonesia introduced new laws toward financial reform by the state.

These and other related laws obligate central and local government agents to

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The regula>ons and peformance measures for accountability prac>ce have been implemented into the en>re public sector of Indonesia. This factor immediately demonstrates an economic reach and sector impact that is generic or MACROECONOMIC.

Any resultant governance framework installed for ongoing accountability and results must meet the requirements of spanning the en>re na>on of Indonesia. This scopes a requirement for a micro or sector based driver that is cri>cal to government – but must be supported in a macroeconomic and inter/intra global governance paradigm.

GAS ANOMALIES TO IPSAS

Standards Statement No. 1 2005 Financial statements cash: revenues, expenditures and financing accounts.

Accrual: assets, liabiliIes and equity accounts. ReporIng EnIIes Statement of Budget RealizaIon by using cash basis.

Other GAS prescribe recogni>ons, measurements, specific transac>ons and event disclosures. Financial statements include those that are presented in other public

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The overall purpose of furnishing financial statements underpins United Na>ons (UN) endorsed interna>onal economic measures of accountability. Financial statements disclose informa>on on the financial posi>on, budget realiza>on, cash flow and financial performance of public en>>es that are stakeholders in governance. They also facilitate a valida>on measure for financial management performance and support decision making process for alloca>on and monitoring of public funded resources.

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The standards are mandatory use by all user-­‐stakeholders excluding government enterprise agents.

The drivers focus on government financial growth and stability through adop>on of UN driven Interna>onal Monetary Fund (IMF) and World Bank guidelines, financial principles and prac>ces that move toward accountability, integra>on and enactment of unified global standards and corporate governance models.

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The primary incen>ve for overall Indonesian economic growth is perceived its transi>onal emergence from a third world developing na>on into a robust, prospering member of global governance society. The highest risk to Indonesia succeeding this drive is the need for extensive and con>nued social development.

Indonesia’s enormous poor popula>on requires upli\ing to a higher minimum standard before the na>on is physically able to realize the objec>ve and enjoy full benefits of economic prosperity in interna>onal society. This transi>on goal is very much championed, and the impetus of all economic endeavours as described within the Long Term Development Plan target for 2025.

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Eighty five percent of Indonesia’s popula>on comprises Small to Medium Enterprise (SME) and local village or rural cultural society. In current status it is deemed physically impossible for Indonesia to align to first world counterparts, implement and maintain global economic rela>ons of unified financial liberal management.

Indonesia suffers frequent exposure to natural disaster and debt burden in carrying its significant poor popula>on. This condi>on ensures that a wealth distribu>on of an elite minority -­‐ without an established ‘middle class’ -­‐ will be unable to sustain a long term resilience outside the ‘underdeveloped na>on’ status it currently holds. The ci>zens now building prosperity as a ‘middle class’ socio economic sector, will be subjected to carrying the tax-­‐social burden of the economy and the millions designated as poor.

Without poverty allevia>on, raising social services and improving governance infrastructure, the internal economic drain by the poor popula>ons of Indonesia will con>nue to drag the na>on as a third world economy. Major factors contribu>ng to this hindrance is deficiency in educa>on, health, infrastructure and general social services – including their impact on human resourcing for trade and economic development in local and interna>onal markets.

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This conundrum has long been recognized and reported by interna>onal economic experts, including analysts and financial specialists of World Bank and IMF. A cri>cal issue underlining this major risk is that as an interna>onal member, Indonesia offers cheap labour prospects to external trade investors but not at the same level of compe>>ve advantage that other mass popula>on economies supply, such as China, India, Pakistan and Mexico. Noted; in 2011 World Economic Forum reported Indonesia as ranking 44th out of 139 countries in the Global Compe>>ve Index and in 2015 ranking 34th – a promising factor in economic growth. With maximising efficiency, produc>on and goods manufactured are able to be supplied effec>vely, but Indonesia does not offer adequate challenge to China as the interna>onal leader in many consumer markets. As with other na>ons, it therefore must carve its own ‘niche’ and currently focuses its strength on natural resources and commodi>es industries. Despite macroeconomic improvement, economists have advised it not necessarily a superior strategy for Indonesia to emulate or compara>vely benchmark against mass labour countries purely for bulk market manufacturing and interna>onal trade -­‐ due to unique anomalies in its economic village culture that favours local and SME industry.

"The Indonesian Economy -­‐ Entering A New Era" (eds Aris Ananta, Muliana Soekarni, Sjamsul Arifin, 2011)

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Indonesia has built its latest phase of economic growth on a robust internal market towards self sustainability. Yet also needs to foster external par>cipatory trade and economic rela>ons. Indonesia rapidly uses up natural resources and is also subjected to climate change and sustainability needs. Indonesia needs regenera>on strategy -­‐ faces a rapid downturn of natural resources industries with impact on jobs and livelihoods in areas such as >mber and fisheries. This impacts needs to internally produce and supply food – already in the face of a world crisis in rice produc>on. If Indonesia follows development by India and China, a severity arises in development security risk, despite lower consump>on of oil, metals and minerals. In the la2er two countries, industrializa>on has acquired vast tracts of land formerly allocated to village and agricultural use. India is now grappling with the problem of water salinity as its former prosperous rice produc>on dwindles. Water management has also become cri>cal for economic strategy in Indonesia. Even though an island archipelago, much of the land is at sea level. As development expends and diverts the underground water table, natural inclina>on is for sea water to replace deficit ground water – even in monsoon periods. In Bali already salinity in drinking and agricultural water supply is becoming a serious problem. Indonesia must also consider other factors in water supply such as sewerage and waste, or sulphur poisoning and mud flow due to number of ac>ve volcanoes.

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It is the impacts of environment, development, conflict and the need for sustainability that is driving UN G8 and General Assembly toward enforcing exis>ng measures and establishing strategic goals of IPSAS in financial management via World Bank consultancy. Climate Change disasters, peace issues, the diminishment of oil resources and the phenomena of Globaliza>on has resulted in raising the inter-­‐ dependency profile of interna>onal society. The OECD guidelines of accountability were established by collec>ve states that had endured the experiences and issues of mul>-­‐lateral economic rela>ons and integra>on. These na>ons had the benefit of mature hindsight and knowledge gained when developing and founding the model of interna>onal accountability and financial management framework as a UN protocol.

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The likely future forecast is that Indonesia will need to join and par>cipate with global economy in rapidly increasing scale and capacity. This factor renders any economic strategy for the longer benefit of Indonesian ci>zens essen>ally needs to span towards sustainability measures and to seek ways that will bridge any current deficit in equity when merging economic prac>ces with interna>onal community.

Due to the global interdependency iden>fied, no longer can fiscal trade and financial management serve alone as the ul>mate heuris>c for economic well being. Since global economic crisis in 2008, first world and developing na>ons stand side by side in establishing new accountable valida>on matrices for economic prosperity and most importantly, strategic adap>ve resilience.

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OECD Reinforces the need for performance: 'Measuring government performance has long been recognised as necessary for improving the effec>veness and efficiency of the public sector. Following the fiscal and economic crisis that began in 2008, however, accurate and >mely data are needed more than ever to help governments make informed decisions about how and where to priori>se spending, reduce costs and promote innova>on in public administra>on.'

OECD, 2011

Organisa>on for Economic Co-­‐opera>on and Development (OECD), Directorate for Public Governance and Territorial Development, Government at a Glance, 2011.

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Financial economic management is cri>cal to the sustainable performance of governments and the business sector. Yet performance results are >ghtly coupled and dependent upon mee>ng local and global environmental and social sustainability needs. Due to the impact of development upon human survival and social environment – the ‘how’ of genera>ng financial affluence -­‐ its ability to regenerate prosperity into local communi>es and build na>onal economy with minimal environmental footprint -­‐ is now called for by UN as essen>al to future survival of human civilisa>on. It was this realiza>on in 2008 that out of necessity brought world economy to unite, collaborate and commit to a new era of accountability in economic management and as a prac>ce of ’good governance’.

In global good governance, tradi>onal financial accoun>ng principles and measures are rapidly being replaced by Management AccounEng prac>ce – a performance/ results based and accountability framework – also known as Sustainability Management AccounEng. Major features are strategy, risk and performance. In addi>on to the raised valida>on measures of accoun>ng and financial results, the recent evolu>on of Management Accoun>ng extends the context of that economic accountability and recogni>on of wealth value, into sustainability paradigm with indicators such as Triple BoIom Line.

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These are measures of organiza>on performance in the context of its overall func>oning and health – or robust resilience and adaptability in its service, produc>on and environment impacts through interac>ve opera>on.

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TBL or similar sustainability accountability frameworks are now raising prominence as GRI, OECD and United Na>ons Commission on Sustainable Development (UNCSD) become major actors in integra>ng a public economic accountability framework inclusive of these addi>onal dimensions of economic value and prosperity.

OECD major focus in this regard is analy>cal and accoun>ng frameworks that integrate economic, environmental and social condi>ons; and measure wealth based approaches that are inclusive of environmental, economic and social inter-­‐ rela>onships.

Mathews, M. R. (1997). "Twenty-­‐five years of social and environmental accoun>ng research. Is there a silver jubilee to celebrate?". AccounEng, AudiEng & Accountability Journal 10 (4): 481–531. doi:10.1108/EUM0000000004417

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Aside from the obvious needs of uniformity in financial management and rela>ons, the prepara>on of Indonesian ci>zens for the future phases of economic growth and na>onal economic resilience are now cri>cal. The most significant a2ainment that can be brought toward restoring any deficit -­‐ and to achieving the steps of building social capacity and capability to bring global rela>ons on a more equal foo>ng -­‐ is through educa>on and local governance infrastructure support. Educa>on raises awareness and understanding of why governance prac>ces are in force. Educa>on establishes pathways for the building of human resource skill and competency in areas that are useful and prosperous to local, na>onal and global economy. Health care is greatly improved through educa>on and awareness. Educa>on opens doors for opportuni>es and future prospects of economic benefits and sharing with other na>ons. The presiden>al recogni>on of these cri>cal factors in the Country Long Term Development Report is now being brought into driving focus with implementa>on of Phase III of the Medium Term Development Plan.

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As a major economic driver, the MNC has to a great extent in first world economies also replaced a large propor>on of SME sector and developed na>ons are now seeking remedial measures to deal with the knock-­‐on effect to local communi>es and deficit administra>on of taxa>on as social services and infrastructure. In other perspec>ves, the role of the MNC has become integral to shaping the direc>on of first world social and commercial progress, educa>on, resourcing and infrastructure development through direct contribu>on and/or needs development drivers. In educa>on, the lack of strategic foresight to fostering the development of relevant skills and competencies needed in the evolving market across industry sectors has resulted in gaps and cri>cal world shortages in specific skill-­‐sets of human resources.

Remedial ac>ons of voca>onal training and educa>on are in various phases of implementa>on worldwide.

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The relevance of the MNC to Indonesia’s emerging economy is the knowledge from impacts, experiences and influences that have been brought with the advent of MNC as a stylised influencer of economy. In first world communi>es, the power of the state has been redistributed through the capitalist model of corpora>on since the advent of reinven>on by UK, Thatcher government and the adop>on of New Public Management – the basis for development of common public and private accoun>ng prac>ces upheld by OECD and standardised as IPSAS. The NPM model brought devolu>on of centralised public owned enterprise into public, private partnerships (PPP) and decentralised private enterprise or agent interests.

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In the “Masterplan for AcceleraEon and Expansion of Indonesia Economic Development, 2015” the President announces a focus on trade and industry increase through pursuance of PPP with na>onal and interna>onal investors. The Public Organiza>on or a PPP demonstrates need for raised transparent accountability to mul>-­‐stakeholders who are opera>ng budgets inclusive of public funding or with process, procedures and deliverables that are cri>cal or in some way accountable to general society. The transfer of governing agent opera>ons shi\s from a culture of skilled public servant producers (e.g. engineers, medical prac>>oners) into a culture of skilled administrators who monitor the deliverables and accountability of private enterprise agents who deliver the public service requirements. The more the responsibility of governance is shared across mul>ple public and/or private stakeholders, the higher the need for shared framework of visible performance results, accountability and compliance measures.

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NGO AND IGOS OFTEN SHARE THE ROLE OF GOVERNANCE RESPONSIBILITY AS MNC AND PPP. EMERGENCE FROM UNDER DEVELOPMENT = A SHIFT IN THE DISTRIBUTION OF SOCIAL FUNDING FROM AID – TO FORMAL GOVERNANCE ORGANIZATIONS. MULTI STAKEHOLDERS – PRIVATE AND PUBLIC SHARE COLLABORATIVE MANAGEMENT -­‐ OR WORK IN SILOS AND DEGRADE CAPACITY AND CAPABILITY MAJOR REASON FOR INTERNATIONAL DRIVE TO ALIGN IFRS AND IPSAS FOR UNIFIED PUBLIC MANAGEMENT

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Aside from areas o\en reported by government specialists that denote issues of ‘power, control and corrup>on’ there are far greater benefits in pursuing a contextual strategy of consolidaEon and collaboraEon among all public and private stakeholders in economic governance. In the words of Overseas Development Ins>tute (ODI) OECD results oriented budget working paper: “We agree with the taxonomy of the ins>tu>onal architecture. However, we would like to re-­‐emphasise that many of the problems with public financial management cut across both the public and private sectors. Therefore, it is important to recognise that a diverse range of financial skills are needed to address them which only a combina>on of accountancy bodies can provide” ODI, Results-­‐orientated budget prac>ce in OECD countries, working paper 209, 2003

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Indonesian reports on government, voice upgraded concerns of neo-­‐democra>c power silos, devolu>on of augmented responsibility for accountable public administra>on. Highlighted is prevalence of non-­‐government social cultural ac>vi>es and those in business and community who independently a2empt to fill perceived gaps in governance support and infrastructure. As a remedy for global governance deficit, consolidaEon and collaboraEon has been upheld by many economic experts worldwide as the most desirable achievement of any na>on and interna>onal society. This is reflected in the Whole Systems Approach to public sector financial management.

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The cultural transforma>on required has been described as ‘impossible’ to achieve due to the prevalence of incongruent opera>ng en>>es with disparate interests, lack of shared vision, cultural axtudinal issues of mistrust and resistance to change. Yet the severity of humanity’s need for sustainability and equity change strategy is iden>fied.

UN Security Council and publicly debated under UNDP since 2012, is rated so extreme as to be crucial to human survival in the not too distant future. With this knowledge, it stands to reason that any na>on a2emp>ng to evolve and deliver good governance accountability measures should empha>cally proceed in this strategic direc>on – an ac>on asserted by President Widodo of Indonesia when announcing the roadmap for economic progress in 2015

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STRATEGIC CHANGE MANAGEMENT -­‐ GOOD GOVERNANCE TRANSFORMATION IS POSSIBLE AND ACHIEVABLE IN INDONESIA WHY? -­‐ RISKS FROM NOT IMPLEMENTING GOOD GOVERNANCE FRAMEWORK OF TRANSFORMATION ARE -­‐ HIGH OPPORTUNITIES AND BENEFITS ARISING FROM GOVERNANCE FRAMEWORK TRANSFORMATION ARE LIKELY TO INCITE RESPONSIVENESS AND COMPLICITY FROM STAKEHOLDERS. HARD DRIVER – GAS ALREADY IMPLEMENTED AND OPERATIONAL – A GOVERNANCE FRAMEWORK FOR PERFORMANCE ACCOUNTABILITY IS ESSENTIAL TO CONTINUE QUALITY OF OPERATION.

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WHY SHOULD EDUCATION SECTOR CHAMPION THE GOVERNANCE TRANSFORMATION? MAJOR RISK FROM NO TRANSFORMATION AND PILLAR OF GOVERNANCE IMPACT IS IN EDUCATION SECTOR WEF REPORTS INDONESIA ONLY RANKS 69 OUT OF 124 IN HUMAN CAPITAL DEVELOPOMENT INDONESIA HAS FAILED TO DEVELOP AND DEPLOY THE HUMAN CAPITAL POTENTIAL AND FACES A HIGH RISK TO ECONOMY – AND ANY ECONOMIC REFORM MEASURES SUCH AS IPSAS GAS CRITICAL MEDIUM AND LONG TERM DRIVERS TO DEVELOP HUMAN RESOURCE TOWARD NEW ECONOMY

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World Economic Forum (WEF) 2015 report released 16 May 2015 This need is also compounded in the high unemployment rate of Indonesians aged between 15-­‐24 years – considered to be the most upwardly mobile demographic of the na>on workforce. This is also the primary demographic of students entering into areas of voca>on where they require competency skill or to acquire more extensive ter>ary qualifica>on. The report also advises that students in this age bracket who graduate are experiencing difficulty in finding and mee>ng requirements for voca>onal job roles. WEF advises that with approximately 125 million Indonesians under the age of thirty, the current failure to find jobs poses a major disaster risk to the poverty scale in Indonesia:

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In global governance it is commonly known economic emergence and growth of na>on prosperity are intrinsically linked to educa>on. In Asia region Singapore demonstrates a prime example of a developing na>on that was able to transform into a leading world industrial economy and sustain that posi>on through u>lising and suppor>ng a top ranking educa>on sector. The key to Singapore’s endured economic success was to focus educa>on in driving economic growth through human capital development. Accompanying the success status is a formidable offering of interna>onal standards recognized educa>on and cer>fica>on programs. A pivotal strategy to this success was to consolidate, collaborate and where appropriate centralise vision for the macro educa>on strategy and inter-­‐linked components.

Recogni>on of ci>zens as poten>al human resource assets paved the way forward for strategies and policies that commenced with raising ter>ary and voca>onal standards, interna>onal PPP and rela>onships programs in educa>on and learning; and the subsequent evolvement of junior educa>on to form adequate bridging to interna>onally accredited standards of voca>onal training and ter>ary educa>on.

New Zealand, Australia and Canada provide similar models of progressing economic development through human capital drivers and educa>on into talent management and succession planning for sustainability workforce and economic wellbeing.

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WHY DOES INDONESIA NEED GOOD GOVERNANCE FRAMEWORK OF ACCOUNTABILITY FOR EDUCATION HUMAN CAPITAL DEVELOPMENT ?

HARD DRIVER: KSAP STANDARDS FOR IPSAS ALIGNED GAS REPORTED RECENTLY BY MINISTER OF FINANCE AS SUCCESSFULLY IMPLEMENTED TO ALL PUBLIC STAKEHOLDERS. A NEW ERA IS NOW ESTABLISHED IN THE MANDATORY CONDUCT OF INDONESIAN PUBLIC SERVICE ACCOUNTING AND FINANCIAL INFORMATION MANGEMENT CULTURE. THIS SHIFT CREATES A NEW REQUIREMENT FOR EDUCATION AND COMPETENCY DEVELOPMENT OF HUMAN CAPITAL – ALL CURRENT AND FUTURE EMPLOYEES WHO WILL BE DIRECTLY AND INDIRECTLY INVOLVED IN MANAGERIAL ACCOUNTING PERFORMANCE AND ACCOUNTABILITY

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As a cultural or ‘so\’ driver, educa>on plays a far greater and indeed pivotal role in economic transforma>on and establishing prosperity resilience, frameworks of accountability and overall good governance that serves as exemplar to global society.

And where the impact of standards implementa>on has reached across the en>re public sector, an ongoing need is immediately iden>fied to maintain the knowledge and skill level of those who are interac>ng with the legally mandated financial administra>on and repor>ng requirements – i.e., those imposed under IPSAS GAS.

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As Indonesia embraces its new commitment to meet interna>onal financial obliga>ons, a need ensues to develop and foster an on going governance culture that will con>nue the level and quality of performance and accountability the new standards impose. In response to this need, it is good governance prac>ce and >mely to consolidate specific standards accredita>on through educa>on development and cer>fica>on programs collabora>vely managed and deployed by universi>es and the ter>ary training sector of Indonesia.

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The ra>onale discussed clearly iden>fies requirement for an educa>on strategy that involves formal frameworks, curriculum establishment and ongoing cultural development denote a significant strategic management and transforma>on ac>vity is required. The context of good governance and accountability valida>on parameters depict a macro-­‐governance framework is necessary – one that reaches whole system.

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The strategy for the governance accountability framework – must orient toward Indonesian economic and global needs: Transparent, ethical and open prac>ce A culture that understands performance requirements and how to evaluate and validate the performance Effec>ve collabora>on – efficiency in opera>ons and effec>ve management through stakeholder collabora>on

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Where a collabora>ve framework is already in place, the planning, budget expenditure and implementa>on may be shared as a collabora>ve ini>a>ve. It will by necessity interact with many common stakeholders but will result in developing separate products or deliverables, o\en with variant strategies and diverse governance cultures. It is not appropriate to fully consolidate many government ini>a>ves as one project ac>vity due to the divergent drivers and goals delivered by each government porWolio. Yet concomitantly, there are many benefits in combining and collabora>ng relevant aspects of a government ini>a>ve – hence the drive for consolida>on.

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The type of culture to achieve with good governance IFAC MODEL

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The steps to developing governance framework aligned with the CIGGA implementa>on are:

Assess Strategic Context Stakeholder Consulta>on Engagement Collabora>on Design Framework & Measures of Accountability Define Requirements Plan and Scope CIGGA Cer>fica>on within Performance and Accountability Framework Implement Manage Measure and Review Framework

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The first step in contextual strategy is to scope the parameters and factors relevant to the governance framework and its poten>al strategic growth and evolu>on.

Move on to the next slide for the notes in both languages.

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The first step in assessing environmental condi>ons aligning with economic factors outlined in this paper is to scope the highest level requirements – the strategic direc>on toward implemen>ng, measuring and valida>ng economic capacity and capability -­‐ to facilitate the interna>onal standards of ongoing culture and opera>ons needed.

It is the strategic contextual model that will determine the ul>mate verifica>on heuris>cs to establish worthwhile and measurable accountability governance that meet the goals and drivers of Indonesia.

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Within factors of the macroeconomic good governance framework, includes specific scope and requirements for the CIGGA implementa>on. Move on to the next slide for the notes in both languages.

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To iden>fy and scope the requirements of financial management and governance cer>fica>on, review of economic goals and objec>ves against interna>onal compara>ve models is undertaken. Considera>on is given to exis>ng implemented KSAP standards and how these are planned to be evolved through ongoing opera>on.

Although there is no formal prescribed implementa>on for accrual accoun>ng prac>ces, it is assumed an op>mum methodology will have been considered to be effec>ve, efficient and economic in the form of a basic requirements model. Unique anomalies in economic strategy, will determine any specific localised tailoring of these fundamentals to curriculum design. Any curriculum requires iden>fica>on of cer>fiable exper>se defined as key areas of competence and standards of performance. Any suite of qualifica>ons and learning modules developed will equip those newly qualified and provide con>nued development to ongoing good governance, accountability and financial management prac>>oners. This will comprise technical, procedural and managerial knowledge that fulfils capability of performance results in areas of exper>se cer>fied. Curriculum modules, qualifica>ons, examina>ons and syllabus will be designed in accordance with learning needs assessment and delivered in appropriate format via collabora>ng senior educa>on providers.

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In addi>on to developing curriculum and learning, the establishment of cer>fica>on in good governance and accoun>ng (CIGGA) requires establishment of an enabling framework that measures and validates management performance and accountability. The first phase of this ac>vity is development of contextual management strategy as earlier discussed. Defini>on of the good governance context will deliberate cri>cal factors of impact, risk, strategy and valida>on heuris>cs for performance and results to be achieved. Indicators u>lised to measure and validate results will also be compara>vely assessed and derived from interna>onal legal and governance models: relevant indexes, codes and standards in alignment with Indonesia specific economic environment. Out of this ac>vity includes review of enabling infrastructure and technology; any deficit or requirement is also determined.

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You may remember yesterday Dr Rahman of UiTM introduces and discusses concepts of governance and the factors contribu>ng to why we need accountability in good governance.

I’d like to just add one more of SUSTAINABILITY RESILIENCE – which represents the Cultural Axtudinal and behaviours engendered into organiza>on and governance to incite and maintain harmony and balance of self direc>on or autonomy and the considera>on of others and environment – as Dr Rahman elsewhere described as ‘selflessness’ and spiritual aspira>ons.

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You may be familiar with the Pie Graph ‘GOVERNANCE CHALLENGE’.

I would like to expand the three strategic contexts described for managing governance accountability – and here present to you the addi>onal perspec>ve of the tac>cal phases and management of the transforma>on required to implement any projects or ini>a>ves of good governance. Here as with formal project management – you see dis>nct phases of design, deliver and evolve take place while managing the risk, managing the stakeholder rela>onships, implemen>ng and driving forward the achievement and ongoing management of the mission. Each of these phases are also able to be measured in isolated accountability and performance measurement ac>vi>es.

Observing a lifecycle management of good governance transforma>on agrees with the statement that ‘implementa>on should not be le\ to itself’ – it needs a driver – preferably managed autonomously and semi-­‐independently.

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When the macroeconomic transforma>on strategy is new and innova>ve, an op>mum approach to implement and verify effec>veness is to pilot an ac>vity of consolidated governance. The inherent needs and issues in educa>on sector, coupled with the financial sector implementa>on of IPSAS GAS, provide an opportunity to bring major development benefits to educa>on sector management.

Stakeholders collaborate a uniform implementa>on of interna>onally recognized quality standards development and accredita>on that fulfils requirements in a cri>cal area of public sector and economic development.

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An integrated progression from this assessment is to iden>fy, model and manage stakeholder rela>onships – examining and defining strategies in alignment with en>ty interac>on and management complexity. The environmental culture is also evaluated through competency needs analysis and strategic change management assessment – an endeavour that can couple learning needs assessment for cer>fica>on program design ac>vity in many areas.

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Needs assessment should provide a situa>on analysis, iden>fy gaps and learning outcomes priori>sed as essen>al or desirable. Cultural adop>on drivers, resistance barriers and assimila>on mechanisms will also be featured. All factors in change management are considered through integrated perspec>ves of human capital, process and best prac>ce; technology, systems and support mechanisms required to bring successful implementa>on and sustainability of the good governance framework with its transforma>on ini>a>ve – in this case the CIGGA program.

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In addi>on to developing curriculum and learning, the establishment of cer>fica>on in good governance and accoun>ng (CIGGA) requires establishment of an enabling framework that measures and validates management performance and accountability. The first phase of this ac>vity is development of contextual management strategy as earlier discussed. Defini>on of the good governance context will deliberate cri>cal factors of impact, risk, strategy and valida>on heuris>cs for performance and results to be achieved. Indicators u>lised to measure and validate results will also be compara>vely assessed and derived from interna>onal legal and governance models: relevant indexes, codes and standards in alignment with Indonesia specific economic environment. Out of this ac>vity includes review of enabling infrastructure and technology; any deficit or requirement is also determined.

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V Governance Framework enables formal test or valida>on heuris>cs to be set for culturally valued a2ributes or indicators that cannot be implemented and operated adequately with reduc>onist methods – for example, solely of business process engineering. A\er defining the highest or most aspira>onal aligned indicators of performance results to be economically achieved, the V method for measure is then able to scale down into micro level of accountability for projects and ac>vity that is ul>mately aligned with the en>re governance goals and drivers.

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Adap>ng the V Methodology for governance accountability does not define the framework itself. The actual framework will be mul>-­‐dimensional, subsis>ng ver>cal, horizontal and even diagonal accountability. Architecture and indicators for measure should not take place prior to conduc>ng the in>al phases of context and strategic assessment to scope parameters and requirements for its defini>on. At this point any number of exis>ng accountability frameworks may be adapted, merged or newly invented as specific to the Indonesia macroeconomic and governance environment, drivers and relevant factors shaping its forma>on. Significant research and compara>ve analysis of poli>cal and economic accountability models has been conducted by World Bank.

A framework of governance accountability will also provide op>mum transparency of delivery, enabling implementa>on of effec>veness and efficiency measures. It succeeds in raising visibility and presen>ng opportuni>es for streamlining of procedures, processes and budget expenditure via collabora>ve approaches to governance ac>vity -­‐ where deliverable outputs or desired goals are mutually shared amongst stakeholders.

h2p://siteresources.worldbank.org/PUBLICSECTORANDGOVERNANCE/Resources/ AccountabilityGovernance.pdf (see also, bibliography)

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Dynamic nature and flexibility of adap>ve design is cri>cal – enabling rapid change of requirements to align with governance trends and edicts. Development is derived from the contextual strategy assessment, through stakeholder management, impacts, risk, con>ngency and other scoping ac>vi>es.

Sector development issues such as finance and educa>on are able to align ver>cal and horizontal strategies within the governance framework, in accordance with unique goals, drivers and issues. The prominent benefits of architec>ng this generic matrix is that its scope and design enables and supports consolida>on and collabora>on in purpose oriented projects that may overlap or share resources and budgets for common endeavours. The term to describe this feature is heterarchic concilience.

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Public and private sector governance have tradi>onally held similar influences and goals – but dispropor>onate priori>es given to performance measures and shared values. This was primarily because the func>onal purpose of the state was to administer and support the needs of society – where the company was incorporated as an individual en>ty whose sole purpose to exist was for ‘financial profit’. This model survived predominantly un>l economic collapses leading up to global crisis of 2008.

As the MNC model has evolved and corpora>ons have rapidly expanded in size and need for opera>ons in societal context, the two sectors have become more similar in regulatory and cultural requirements towards a sustainability results measure that shares economic factors across triple bo2om line to iden>fy the adap>ve resilience of the business or economic model.

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This is the most recent trend in Managerial Accountability or Sustainability arising in global governance. The EU enterprise governance framework will be in blanket opera>on from 2020.

With the issues and factors iden>fied in macroeconomy – Indonesia’s scope for good governance will represent a similar model – for results consolida>on, collabora>on and integra>on of strategic drivers.

At the beginning of this presenta>on – I s>pulated how important it is for Indonesia to aspire to good governance frameworks that are at the forefront and not lagging behind global governance economic trends. A major contributor to this statement is the risk factor of not doing so. The risk is that Indonesia will implement an inferior solu>on or par>al solu>ons that cannot effec>vely come together for whole of government ac>vity.

Behind this risk is the enormity of economic financial WASTE in implemen>ng enabling infrastructure, regula>ons and resource development and management that does not meet evolving requirements.

STRATEGIC PLANNING MITIGATES WASTE.

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An op>mum macroeconomic framework would transfer the governance pillars depicted in the previous slide EU model for enterprise governance. This example of macroeconomic governance paradigm makes it clear that the term “sustainability” refers to the VALUES ATTRIBUTION of Triple Bo2om Line indicators rather than purely environmental management, eco-­‐sustainable or alone, ‘green strategy’. In this environmental context, ‘sustainability’ ul>mately means a society with ul>mate values of equitable peaceful society, economic balance in harmony with others and environment – a defini>on that aligns with UNDP goals. A cri>cal factor and requisite for performance measurement is “regenera>on” – a recogni>on that in every pillar of governance results are pivotally measured on the ability to regenerate back into the governance arena, to promote stability and growth, to be adap>ve and resilient and to prac>ce with human ethics and accountability when inter-­‐rela>ng and managing economic ac>vi>es.

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The outputs of strategic assessment ac>vi>es culminate in architectural design and development of a suitable good governance and accountability framework. To define a good governance accountability framework, an implementa>on strategy and its project management planning is also scoped, subsequently enabling the iden>fica>on of base level accountability and valida>on measures. Compara>ve assessment and benchmarking requirements against exis>ng models of good governance such as Interna>onal Federa>on of Accountants (IFAC) Interna>onal Framework, is part of design ac>vity. Organiza>on and governance accountability consists of mul>-­‐dimensions, of macro and micro levels of accoun>ng and performance results valida>on.

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For the purpose of CIGGA program implementa>on, accountability results will mirror and map to competence and capability demonstra>on of the exper>se, technical, procedural and performance standards defined in learning curriculum.

Accountability measures are also iden>fied in accordance with the variant features of end-­‐user stakeholders and their associated role specifica>on or job tasks. The level of accountability intricacy is op>mal when simplified into generic human resource role competence categories -­‐ when implemen>ng a new transforma>on concept into a culture for the first >me.

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Complexity and detailed measures can be evolved with subsequent review and enhancement a\er the cer>fica>on program and its governance framework has been in cultural use for a suitable period of >me. This task will establish effec>veness and monitor the progress and development of end-­‐user prac>>oners.

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Cri>cal ac>on required is to establish the leading authority and high level driver or ‘change sponsor’. Due to its global interac>on, the Change Sponsor is perceived as President Widodo, for formal authority under presiden>al decree. The leading authority and ‘Program Owner’ is apparent as the Minister of Educa>on, who is requested to endorse and delegate the strategy proposed. A ‘Partner Owner’ may addi>onally be the Minister of Finance, or in lieu of shared program ownership, authority, endorsement and driver will be sought as a cri>cal Steering Group member. Addi>onal representa>on for Steering Group membership of the program governance is recommended and sought from Ministerial sectors of Communica>ons, Research, Science and Technology, Engineering Infrastructure and any other Ministerial porWolios that may perceive a pivotal interest in the governance program oversight.

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It is proposed that out of presiden>al decree and steering group authority, a managerial taskforce be formally appointed to conduct the ac>vi>es described for CIGGA cer>fica>on, architectural development and implementa>on of the good governance accountability framework; and its strategic transforma>on. The managerial taskforce will serve the purpose of planning, interac>ng, managing and delivering the program, in consulta>on and under advisory from the Steering Group.

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As a venture with macroeconomic reach, cri>cal stakeholders (but not necessarily key drivers) across all ministerial porWolios of government will be engaged. The framework reaches into the domains of decentralised government authority and requires an extensive ac>vity of stakeholder engagement and management at region level. Ini>al approaches to iden>fying and elici>ng the high-­‐level engagement of cri>cal stakeholders and generic government stakeholder input may best be undertaken through a ConsultaEon Program for Governance Accountability and EducaEon.

This ac>vity will iden>fy and ini>ate the stakeholder and rela>onships management context. Expressions of interest and par>cipatory input will be invited from members of government and those involved in governance. Of specific relevance to this ac>on is the engagement of universi>es and senior ter>ary organiza>ons that may consolidate to agree the program and give collabora>ve input to its oversight. A consultant team appointed by the managerial taskforce may also undertake further stakeholder en>ty analysis and priori>sa>on of involvement.

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A minimum of three to four months (dependent on resources allocated for the relevant ac>vi>es) for the cri>cal period of consulta>ve program, repor>ng, strategy, learning and framework architecture is to be presented, with on-­‐going review and evolvement for at least a period of eight months as the program is developed, prototyped and implemented. A concurrent communica>ons and public rela>ons strategy should peak promo>ons and awareness raising a\er sign-­‐off around eight months a\er commencement, for the two month prepara>on period preceding go-­‐ live with the CIGGA program.

The change management ac>vity for this two month period will also comprise enabling the cer>fica>on program learning delivery and administra>on (e.g. student administra>on, enrolment, fee processing and other curriculum managerial func>ons). A business readiness checklist for accountability management by the public organiza>on prac>>oners will also be conducted.

Following a four to six month opera>onal period, the effec>veness of the CIGGA program, its context and governance accountability framework should subsequently be reviewed and validated. Any enhancements or evolved requirements iden>fied may be incorporated with the development of strategies for future consolida>on ini>a>ves to be delivered within the good governance accountability framework.

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This ac>on paper has been deliberated at the request of senior economic members of Indonesian Educa>on, Financial Management and Government for the purpose of sharing knowledge and exper>se of the transforma>on obliga>on, to scope the requirement and propose the strategy for managing the successful governance ini>a>ve. In concluding observa>on, the >me constraints of the target ‘live’ date for CIGGA to support IPSAS GAS already implemented, calls for urgent considera>on and direc>on from Sponsor, Program Owners and Steering stakeholders to commence the requisite ac>vi>es outlined.

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